The state of Nevada has clarified that wholesale lenders doing business in the state are required to be licensed as mortgage brokers.
Under the Nevada Mortgage Brokers and Mortgage Agents Act, brokers are defined as individuals who directly or indirectly hold themselves out as being able to make loans, or buy or sell notes, secured by liens on real property.
That definition includes wholesale lenders.
The requirement was outlined in a bulletin Monday from the Nevada Department of Business and Industry Division of Mortgage Lending. The clarification was prompted by a flurry of questions.
“Unless a person is otherwise exempt, a person is prohibited from offering or providing any of the services of a mortgage broker or otherwise engaging in, carrying on or holding himself or herself out as engaging in or carrying on the business of a mortgage broker without first obtaining the applicable license under the act,” the notice stated. “A wholesale lender’s business activities generally meet the definition of ‘mortgage broker’ and would require licensure, unless the wholesale lender is otherwise exempt from the licensing requirements.”
But an individual is not considered to be acting as a mortgage broker if the person only offers to provide funding to invest in mortgages to another person who is licensed or exempt under the act.
The state said that it interprets the exclusion language to exclude a person who is a wholesale lender that only provides a funding source for licensed or exempt mortgage brokers to close and fund as the lender of record.
James Westrin, Nevada’s mortgage lending commissioner, explained in a telephone interview that the only entities that aren’t subject to the licensing requirement are warehouse lenders. Wholesale lenders are required to be licensed whether or not the originating mortgage brokers close in their own names.
If the wholesale lender buys the note or purchases the assignment of the note from the licensed or exempt mortgage broker, rather than taking an assignment, the wholesale lender is acting as a ‘mortgage broker’, and is required to be licensed as a mortgage broker, because it has held itself out as ‘being able to buy or sell notes secured by liens on real property,'” according to the state.
